Senate debates

Monday, 26 March 2018

Bills

Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017

12:20 pm

Photo of Jim MolanJim Molan (NSW, Liberal Party) Share this | | Hansard source

I'd like to remind the Senate of some of the points that I previously covered, very quickly. I spoke about the fact that tax reform fits into a larger economic context and about how this government is achieving that context. I spoke about international moves to lower corporate tax and how that is very important to us. I said that Australia depends for its prosperity, for its job growth, on international investment and that the government's enterprise tax bill will keep us internationally competitive. I reminded the Senate that Labor opposes tax cuts and has told Australian business to expect nothing from a Labor government. I also reminded the Senate that the Labor policies will aggregate to something like $200 billion and that the increase in tax to every Australian will be something in the order of $8,000. What we argue for is equality of opportunity and not some misplaced socialist view of the redistribution of other people's money.

Now I'd like to address some of the bigger issues that go towards business tax reduction. The first one is that Australia can afford the company tax reform. Our business tax reform is fully costed and is reflected in the government's budget forecasts and projections, which show the budget will return to surplus in 2021 and will remain in surplus over the medium term. The budget is forecast to be in surplus by the time the company tax rate is reduced to 27.5 per cent for companies with a turnover below $250 million and is projected to have been in surplus for six years before the company tax rate eventually reduces to 25 per cent for all companies. So Australia can afford its company tax reforms.

Second, company tax reform is not just a handout to the big end of town. As former Treasury secretary Ken Henry said, because high company tax rates reduce investment from overseas and lower the demand for Australian workers, 'in the long run, company tax affecting mobile capital is paid by labour—predominantly geographically immobile unskilled labour'. Recent research in the American Economic Review, the most respected economic journal in the world, examined company tax rates in Germany and found that workers bear about one-half of the total company tax burden. Low-skilled, young and female employees bear a larger share of the company tax burden. So company tax reform is not just a handout for the big end of town.

Third, company tax cuts will increase investment, growth, employment and wages. The IMF, you may be aware, has recently lifted its global growth forecast off the back of the US tax cuts. Billions of dollars in additional capital investment flowed into the US economy within weeks of the company tax cuts passing the US Congress. More than 350 US companies have given wage increases or bonuses to four million workers following the Trump administration's tax cuts. The government's first tranche of tax cuts passed in early 2017, and last year the Australian economy added more than 400,000 new jobs. Wages growth has started to lift, with the most recent national accounts figures showing wages growth of 1.2 per cent over the September quarter and three per cent throughout the year. So company tax cuts will increase government investment, growth, employment and wages.

Fourth, under dividend imputation, business tax cuts will not reduce returns for self-funded retirees. Some have claimed that a lower company tax rate would leave some investors worse off by reducing franking credits under dividend imputation. This is incorrect. A lower company tax rate would be good for investors, including retirees, by boosting future dividends and the future value of their shares. As Self Managed Superannuation Fund Association Chief Executive John Maroney accurately pointed out, a lower company tax rate would result in higher earnings which would then be distributed in higher dividends or used to increase the value of companies over time. So, under dividend imputation, business tax cuts will not reduce returns for self-funded retirees.

Fifth, Australian businesses pay their fair share of tax and deserve tax relief. All Australian businesses are required to pay business tax on their profits and not on their earnings. Commissioner of Taxation at the Australian Taxation Office, Chris Jordan, has dismissed suggestions of widespread tax avoidance by businesses operating in Australia. He told the Senate Economics Legislation Committee:

I have said many times that the majority of large corporates, especially Australian owned companies, pay the right amount of tax in Australia and are open and transparent in their dealings with us.

So Australian businesses pay their fair share of tax and deserve tax relief.

Sixth, even with pre-tax deductions available to Australian businesses and also available overseas, our effective business tax rates are comparable. Data on effective average tax rates collected by the Oxford University Centre for Business Taxation between 2007 and 2017, which takes into account depreciation rates and other international differences in tax bases, shows that Australia's effective average corporate tax rate is now 27th highest of the 33 OECD economies. In relation to the G20, between 2003 and 2017, Australia slipped from fifth to 12th place. Importantly, the most recent update to the Oxford data, in early 2017, was undertaken before the US repealed its corporate alternative minimum tax, cut its headline rate from 35 to 21 per cent and allowed full immediate expensing of short-lived capital investment for five years.

I will close with two quotes from the Leader of the Opposition. On Tuesday, 23 August 2011, in the House of Representatives, he said:

Cutting the company income tax rate increases domestic productivity and domestic investment. More capital means higher productivity and economic growth and leads to more jobs and higher wages.

Secondly, on 30 March 2011, he said: 'Lowering the corporate rate for small businesses, as the Greens propose, creates an artificial incentive for Australian businesses to downsize.' (Time expired)

(Quorum formed)

12:30 pm

Photo of Eric AbetzEric Abetz (Tasmania, Liberal Party) Share this | | Hansard source

In the absence of the Greens senator who was supposed to speak, I'm absolutely delighted to support this legislation. I would encourage colleagues to consider that the practical consequences and benefits of the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017 are not necessarily reflected in the bill's title. Rather than calling it 'enterprise tax plan No. 2', personally I would be calling it the 'jobs and wages growth plan' because this bill will increase jobs and wages growth. It will increase job opportunities for our young Australians. This bill will increase the take-home pay of Australia's wage earners.

This bill is not an exercise in economic theory; this bill is an exercise to assist the men and women of Australia with their household budgets. It's an exercise in ensuring that those that don't have a job have a greater opportunity of obtaining a job, and that those that are currently in a job are able to look forward to higher wages. Experience overseas shows unequivocally that lower tax rates for companies translate into more jobs. My colleague who spoke just before me, Senator Jim Molan, pointed that out exceptionally well with the numerous examples that he provided. I don't intend to repeat those examples.

The nature of enterprise is to build and expand, and if you want that building and expansion, which is based on risk taking and reward for effort, then you need to provide incentives to encourage that positive behaviour. In a world where Australians—and, indeed, all the world's investors—have plenty of scope and options for investment, we in Australia need to be competitive and to remain so. Currently, we are slipping behind the rest of the world. The more we tax, the less attractive we are to investment. So the higher the tax, the less the investment; the lower the investment, the fewer jobs there are. Of course, with fewer jobs comes all the social dislocation that I trust nobody in this place would want to see. The fewer jobs there are, the greater the pressure to dampen wages growth. So the more tax companies pay, the less capacity they have to pay higher wages, the less capacity they have to create more employment opportunities.

In the face of this logical, perfectly sensible approach, we hear the ugly words of envy and jealousy from the ACTU and, therefore, the ALP and the Greens in circumstances where at least the Australian Labor Party actually know so much better. The simple fact is:

If you are against cutting company tax, you are against economic growth. If you are against economic growth, then you are against jobs.

These are not the words of somebody like Robert Menzies or John Howard or the Institute of Public Affairs; these are the words spoken by a former Labor Prime Minister, Julia Gillard. She got it. She understood it.

It's all pretty easy and all pretty logical when you know that investment creates jobs and wages growth. How do you encourage that investment? By reducing the tax burden, especially in circumstances where investment is now a worldwide opportunity and, therefore, people will take their capital and investment to those countries where the tax regime is somewhat more favourable. Ms Gillard, in the House of Representatives, said: 'If you are against cutting company tax, you are against economic growth. If you are against economic growth, then you are against jobs.' She simply made a very honest statement of fact. As I said, it was uttered by none other than a Labor leader. So she got it. One wonders why the current Labor Party don't get it.

The unavoidable fact is that capital and investment flow to tax competitive nations and capital and investment create jobs. Therefore, if you want jobs, you need investment. If you want investment, you need to have a competitive tax regime. It really isn't that hard to work out. Economics 101 should have taught everybody in this chamber that fundamental principle. Even the Labor leader in this place acknowledged these facts when she said:

We understand that the cut in the corporate tax rate is important to increase productivity, to promote broad based economic growth and to encourage more investment and jobs across Australia. Lowering of the company tax rate is good economic policy.

So here we have not only Ms Gillard but also Senator Penny Wong endorsing this approach to jobs growth and wages growth—and I welcome her contribution. It's just a pity that the Australian Labor Party don't seem to be able to be consistent in relation to these matters. It seems that, when they're in government, they understand good economic policy but, when they're in opposition, they seek to play the ugly game of envy, of jealousy and of trying to divide the nation in some sort of faux class warfare.

Just in case there are any on the opposition benches who are concerned to learn what the view of their current leader, Mr Shorten, is, let me quote him and remind those hapless Labor senators who are struggling with this legislation. There are many, many quotes from Mr Shorten, but allow me to offer just a few to the Senate. He has said:

Cutting the company tax rate increases domestic productivity and domestic investment. More capital means higher productivity and economic growth and leads to more jobs and higher wages.

So what is it that has changed in the economic construct since 2011 to 2018? That fundamental economic principle has held true throughout human endeavour. As we see countries all around the world reducing their corporate tax rates, it is important that Australia remain in play and remain competitive. Mr Shorten got it in 2011. He's got to explain to the Australian people why, in 2018, that fundamental economic principle no longer applies—can be put through the shredder and can be discarded like a soiled tissue no longer of any consequence. Of course it is of consequence to the Australian men and women who need and deserve higher wages, and those unemployed Australians who need and deserve a job, if we can get the policy setting right.

The Labor Party knew only a matter of five, six or seven years ago what they had to do to enhance job opportunities and wages growth. We on this side know what needs to be done. As I reach out across the aisle to those in the Labor Party, I don't have to rely on any statement from Prime Minister Turnbull or Treasurer Scott Morrison. No, I rely on the statements of the former Labor leader Julia Gillard, the Labor leader in this place, Senator Wong, and the alternative Prime Minister, Mr Shorten, who all support this approach to the tax regime. Indeed, you can just imagine Mr Shorten delivering this to the Australian Council of Social Service's national conference:

Friends, corporate tax reform helps Australia's private sector grow and it creates jobs right up and down the income ladder.

In other words, Mr Shorten knew, and was willing to go to ACOSS whilst he was a minister and tell them, the importance of company tax rates being reduced—not on the basis of some theoretical economic exercise, but his absolute belief and understanding that to do so would create jobs right up and down the income ladder. I say amen to that. It's absolutely true. It is correct. It is undisputed.

So you have to ask the question: why is the alternative Prime Minister today going back, crab-like, and walking away from those statements that he made whilst he was a minister of the Crown and knew what he had to do? What he's doing is acting as a spoiler in a very important debate in this country, a debate that wants to see even more jobs growth. I recall saying back in 2013, as the shadow minister for employment at the time, with the then Leader of the Opposition, that, if we were to gain government, we would seek to create one million jobs in the first five years of government. That was ridiculed; it was pilloried. Today, with about six months still to go, we are nearly at that one-million threshold that we set ourselves. But, having set ourselves that goal and going to achieve it, we are not going to rest on our laurels and say that that is where it finishes and ends. We say, 'No, we want to create even more jobs, even more opportunities, even higher wages.' That is why we are seeking to introduce this legislation.

Indeed, Mr Shorten, in a TV interview, said—listen to this:

Any student of Australian business and economic history since the mid-80s knows that part of Australia's success was derived through the reduction in the company tax rate … We need to be able to make life easier for Australian business, which employs two in every three Australians.

Mr Shorten himself recognises what needs to be done to look after two-thirds of the Australian workforce. Indeed, so sure was he of the need for this policy, he was able to say 'any student of Australian business and economic history' knows that this is essential. So, if he knew in 2012 that this was essential, why is it that today he cannot bring himself to say: 'Yes, it remains essential. Yes, we have to drive up wages growth. Yes, we do need even more employment opportunities for our fellow Australians'? I will tell you why: he is playing a very cheap and nasty game, seeking to play the politics of division at the expense of our fellow Australians who do need wages growth and who do need employment opportunities.

Sadly, what we have laid out before our fellow Australians yet again is the duplicity of the Labor Party. Labor are hoping that the electorate might believe their false, misleading and ugly rhetoric, dripping with jealousy and envy about profits, when Labor actually know the truth: that company profits translate into jobs and wages growth. We know that because Labor know it. We know that Labor know. Why do we know this? Because Labor have told us so. That is the great difficulty and the credibility gap that the Leader of the Opposition and all his colleagues suffer from today. They know the truth and they know what good policy is, but cheap politics denies them the opportunity to say that which is needed.

Let's also understand that the higher the tax regime the more Australian consumers and workers pay. Why do I say that? Well, there was a certain doctor of economics who opined, and let me quote: 'Company taxes end up being paid by consumers and workers.' Who might that doctor of economics be? None other than another Labor spokesman, Dr Andrew Leigh, who has a position in the other house on Labor's frontbench. So, no matter how you approach this issue in relation to consumers being worse off, workers being worse off, the unemployed being worse off and household budgets being worse off, we have all the statements from Labor spokesmen, time and time and time again, indicating why this policy should be implemented and implemented to its full. So I yet again ask the Australian Labor Party: why is that which was common sense, that which was known by 'any student', to quote Mr Shorten, now, all of a sudden, no longer true? Why is it no longer correct? Are they saying that the policy that they pursued when they had the privilege of being in government a wrong policy, a false policy, that did not deliver the dividends to the Australian people that they had promised?

I simply say that the Australian people, courtesy of Labor's stance on this particular policy, have been put on notice as to how Labor would now govern. No longer can we rely on good, sensible economic policy. The Australian people—and I am one—are willing to admit that there was relatively good and sensible economic policy under the Hawke-Keating era. Yes, there were the aberrations, but, in general terms, things were relatively good. But all that common sense and the bipartisan approach to economic reform have been jettisoned in favour of the cheapest and nastiest of politics. There are all the quotes from Labor spokesmen that I've put before the Senate today, from the current leadership team of Mr Shorten and Senator Wong to the former leader, Ms Gillard, and other spokesmen within the Labor Party. They know the truth about the need for this so-called enterprise tax plan. As I said earlier, I wouldn't call it an enterprise tax plan, because the real purpose of this legislation is a jobs and wages growth plan. How do you achieve it? By having an enterprise tax plan.

The real reason, the real rationale, the real thing that drives the coalition on this is our desire to ensure that more of our Australians, especially young Australians, are given the opportunity of employment and that those who do have employment have the capacity to manage their household budgets in circumstances where wages growth has been limited in recent times. The Labor Party have been on record, time and time and time again, saying that cutting company tax does translate into wages growth, but it now seems that the Labor Party, not content with seeking to deny our fellow Australians more job opportunities and wages growth, are also hell-bent on denying our fellow Australians who have scrimped and saved for their retirement by raiding their superannuation and their shareholdings with a dividend imputation credit system. For the Labor Party to have adopted that policy in recent times is another highlight and another indication of how they would govern. There is no tax that the Labor Party is not attracted to; there is no expenditure that the Labor Party doesn't like. In all those circumstances, the Australian people, and especially the next generation, will be so much the worse off. I support this bill and I encourage those in the Labor Party to read the commentary of Senator Wong, Mr Shorten, Ms Gillard and Dr Andrew Leigh, and I especially say that to those on the cross bench.

12:50 pm

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

I rise to speak on the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017. Before I commence with the remarks I've prepared, I want to respond directly to Senator Abetz, who says he invites the chamber to read the comments of me and others in relation to the company tax cut that was considered under the former government. I'd make this point: we were very clear that the company tax cut had to be funded out of changes to the business tax system. Do you know what this government is doing? It wants working people—working people!—to fund the cuts for big business. There's a very stark difference in the position that the Labor government took and the position that the coalition is taking. In fact, there are few policies in recent years that I think have more starkly illustrated the difference between the Labor Party and the coalition than this government's commitment to handing $65 billion to Australia's biggest and wealthiest companies.

Recall that this is a tax cut which comes at a time when government debt is at record levels, when Australia's health system is under pressure, our schools need more resources, and inequality in this country is worsening. What do we see this government's priority as? Their priority is giving a massive handout to our most powerful and most wealthy. It's also a transfer of wealth offshore, with an estimated 60 per cent of the benefit of the tax cut likely to head overseas. Remember that this is on top of the $19 billion this government is giving our wealthiest taxpayers over the next decade by cutting income tax for people earning over $180,000. The only income tax cut we have seen in the five years the Abbott and Turnbull governments have been in power is for people earning over $180,000. In the very same budget, where this government reaffirmed its commitment to giving big business a $65 billion tax cut and cutting income tax for people earning over $180,000, it slugged working- and middle-class Australians with a $44 billion tax hike—a $44 billion tax hike! That's what the Medicare Levy increase costs. These are their priorities: a tax hike for middle Australia, a tax cut for the wealthiest taxpayers and a massive handout for big business. At a time when we see school funding being cut, universities being forced to push up fees, the out-of-pocket costs of health care soaring, the government demanding pensioners work until they're 70 and the government continuing its intention to cut the energy supplement, the biggest companies in the land are being handed $65 billion.

Of course, there's the debt. Gross Commonwealth debt has hit $520 billion. This is the party that said they'd deal with the debt and deficit disaster. Remember the debt and deficit disaster? Gross Commonwealth debt has risen almost $250 billion since they've been in government. They are very quiet over there, aren't they? They hate to be reminded of the fact that debt and deficit under them has gone up $250 billion. You've made the debt and deficit disaster $250 billion worse. Now you want to make sure that you give a company tax cut so that the budget is in a worse position. Which companies are so deserving of the massive act of generosity from the Turnbull government? I'm glad Senator Williams is in here because, of course, among those undeserving recipients is the banking sector. He knows a bit about that.

Photo of John WilliamsJohn Williams (NSW, National Party) Share this | | Hansard source

Thank you for the compliment.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

I will give him that.

In the very same month that the royal commission that this government fought so hard to prevent is hearing daily horror stories of the appalling behaviour of our banks, what's this government's response? 'Give the banks $7.4 billion in tax cuts. Let's do that.' That's what the government's priority is. According to the Australia Institute, a third of this tax cut will go to just 15 of our most profitable companies, companies which are clearly doing well, making profits—but, in this government's view, not making enough. Their argument is that somehow this will trickle down to workers and it will boost employment. I want to ask something, just a very simple, straight question: does anyone really think that Woodside or Rio Tinto aren't already employing everyone they need to maximise their profits? Do you really think they are holding back from employing the workforce they need to maximise their profits? Does anyone really think the banks will suddenly put on more tellers and open more branches, and Woolworths and Coles will get more shelf stackers, if we just give them more money? There is no evidence for this. Indeed, if directors did give such a commitment they probably would run the risk of breaking the law, because, of course, what is their No. 1 duty? It's not to their staff or the country but to their shareholders. Their job—we know this—is to maximise return to shareholders. That's what we know. That's what we have seen.

We are seeing it also in the context of the tax cuts in the United States that the government keep pointing to. According to US research firm TrimTabs, the level of stock buyback announcements made by corporate America since the start of the year has reached a staggering $214 billion. That's almost as much as you have increased the gross debt of the Commonwealth in that time frame. This is already the biggest share buyback in US history, and that's just the start, with the Bank of America predicting that the S&P 500 companies will use repatriated foreign profits to buy back about $450 billion of stock, around triple the previous record of a single year's share buybacks. So, instead of investment and jobs, what we are actually seeing is higher share prices, higher returns for stockholders and bigger pay packets for the chief executives, whose pay is tied to share prices—all funded by a company tax cut.

Just last week, Senator Pauline Hanson declared that we weren't American, that tax cuts would not benefit workers and that she would never support them. Well, she was right then, but now she's been inspired by the US experience—

Senator Williams interjecting

You didn't listen to my opening remarks about how we actually funded the company tax cut after the business tax system. You're making punters fund it, mate. You're making middle-class Australians fund it. We said the business tax sector had to fund it. You're hitting the budget, cutting schools, making people work longer and putting tax hikes on working people. So I'm happy to have that debate, Senator Williams.

Anyway, now Senator Hanson says she's been inspired by the US experience and will back these cuts in return for a pilot program of 1,000 apprentices. Let's talk about that. This is in the context of a government which, since it came to power, has cut 140,000 Australian apprenticeships, in the name of budget repair. Now it gets support for a $65 billion handout from One Nation in return for a pilot program which puts back less than one per cent of these cuts—I think it's 0.7 per cent. Senator Hanson also cites as evidence for her backflip the wage rises which have supposedly gone to workers in the US as a result of the tax cuts. Let's look at the amount of money allocated so far on bonuses and wage hikes in comparison with Wall Street's buyback bonanza. Research from academics Salzman and Lazonick, as well as the Academic-Industry Research Network, finds the S&P 500 companies have devoted about $5.6 billion—that is, six per cent—of the tax cuts to bonuses and wage hikes. Much of this has been paid in one-off bonuses. It's a pretty expensive way to give workers a small handout, a pretty effective way of shovelling massive amounts of their money into the pockets of some.

Of course, the double whammy for Australia is that much of the benefit of the Australian tax cuts will flow overseas, either in direct profits or other benefits of our foreign tax arrangements—and in return for what? As Peter Martin revealed in the Fairfax papers last month, Treasury is now forecasting the net benefit of the tax cuts will be a one-off gain in 10 years time of around 150 bucks per person. I think Ross Gittins got it right when he said, 'It doesn't seem a lot.' Dr Goldie, CEO of ACOSS, points out:

Any economic gains from cutting company taxes are decades away, while the cost of the cuts will be felt immediately …

  …   …   …

Right now the federal budget is in deficit, and we can't be confident it will move back into surplus in the next few years.

  …   …   …

What that means is that if unfunded tax cuts go through, people across Australia will have to start paying more for essential services they have always relied upon.

Of course, the $150 a year a decade from now assumes all sorts of unlikely outcomes such as that, in return for lower taxes, business will pay more. The Australia Institute found that the Treasury-commissioned modelling attributes a $3.9 billion gain in government revenue to 'multinationals suddenly and voluntarily deciding to pay more tax because the company tax rate drops five percentage points'. Does anyone remember the Laffer curve, where the more you taxed the less you got?

There isn't any evidence, and there's no commitment, that one cent of this tax cut will boost employment or boost wealth for anyone other than the companies that directly benefit. It is a tax cut built on putting ideology and hope over evidence and experience. This was made clear in the Business Council letter last week, which gave no guarantees of any level of investment or employment in return for the $65 billion. Senator Hinch said, correctly:

The business council letter was very Kumbaya, you know, we'll do this and we'll do that, but it didn't guarantee anything.

What is most obvious, at a time when the budget is massively in deficit and Commonwealth debt under this government has almost doubled to over half a trillion dollars, is that these big business tax cuts are not affordable.

I return to the contribution of Senator Abetz, who pointed out that Labor, in government, also had a plan to lower company taxes. The difference is that we had a plan to fund it. Prime Minister Gillard told a business forum in 2012:

We're in the cart for a lower company tax rate but it has to be affordable. And that means it has to be funded by other changes in the business tax system.

When Prime Minister Gillard imposed that condition in June 2012, Australian government debt was $238 billion. It is now $520 billion. But no such condition is being imposed by the coalition on this occasion. They are very clear who is paying it: ordinary working people are paying it—either through the tax hikes which are proposed for working people or through the inevitable and continued decline in essential services that the budget position drives. So if more modest company tax cuts weren't affordable in 2012 without trade-offs, how are far bigger cuts more affordable today when this government has almost doubled our debt?

As Chris Bowen said, the $65 billion company tax hit is 'an unfunded budget wrecking ball' with no guarantee for investment in Australia or wage rises and it will be left to middle- and low-income working Australians to pay for them. There is a better way, a smarter way—a Labor way. Labor has announced its Australian investment guarantee, which, instead of simply funnelling money straight into the pockets of shareholders, is a pro-growth, pro-jobs reform that is only available to businesses making new investments in Australia. Under the guarantee, companies that make the decision to invest in Australia will be able to immediately deduct 20 per cent of any new eligible asset worth more than $20,000. Do you know what that means? It means the tax break goes to those who invest here and employ here whereas, with the tax cut that is being proposed by the other side, 60 per cent of the company tax handout goes to foreign shareholders.

Budgets are about priorities. What this bill tells us is that the coalition's priorities for Australia are a $65 billion tax handout for big business whilst increasing taxes on every Australian earning over $21,655. Look at this government's choices: cuts to schools, cuts to universities, cuts to hospitals, cuts to pensions and making middle Australia pay more in taxes—so they can give more money to big business and send billions of dollars overseas. Mr Turnbull, Mr Morrison and those on the other side have made their choice. They choose big business over middle- and working-class Australians and they choose multinationals over Medicare.

Well, Labor says no. At a time when this government has sent debt soaring above half a trillion dollars, has cut schools and hospitals and is hiking tax on middle Australia, our priority cannot be, must not be, a $65 billion handout to the nation's most powerful corporations.

This will be the choice at the next election. Have no doubt about it: the contours of the election campaign, the landscape of the election campaign, are being set in this chamber this week. And it is our party on this side—committed to schools and hospitals, and tax breaks for actual investment in Australia to drive local jobs and growth here in Australia—versus those on the other side committed to tax handouts for multinationals and tax hikes for working people.

1:05 pm

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party, Assistant Minister for Science, Jobs and Innovation) Share this | | Hansard source

If one wanted to reflect on how far the Labor Party have departed from their former economic credentials, we heard it just then from Senator Wong. Her speech today could have been written and delivered by Jeremy Corbyn or it could have been written and delivered by Sarah Hanson-Young. It was so completely lacking in logic and so internally contradictory as to demonstrate just how far the Labor Party have thrown out even the pretence that they care about growing the economy and even the pretence that they care about basic economics when it comes to running the country.

There is one thing that Senator Wong is correct about, and that is that the contours of the next election campaign are being determined, and I will go into that. As we face this choice over the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017, there is no doubt that the vision that the Labor Party are putting forward for the future of the country is one that would take us in a radically different and destructive direction when it comes to prosperity in this country, when it comes to jobs in this country and when it comes to the future of our children and their ability to find employment and to have decent wages. It would all be thrown out.

Now Senator Wong, in her Green-like or her Corbyn-like rhetoric, got a number of things just completely wrong. She was wrong on personal income tax cuts. Senator Wong and the Labor Party are now claiming, through their use of rhetoric like 'handouts', that in fact money created by Australians and created by Australian businesses is all the government's money, that 100 per cent of it should go to the government and then the government can determine how much of it you get to keep. Do you get to keep 10 per cent, 20 per cent or 30 per cent? That's the rhetoric of handouts and that's the rhetoric of redistribution that we just heard from Senator Wong, which builds on the narrative that Mr Shorten has been employing in this debate. Senator Wong has just demonstrated how vacuous the modern Labor Party is.

You can understand that the Greens might not get that actually cutting company tax is good for the economy, they might not get that cutting company tax is good for jobs and they might not get that it's good for wages, but the Labor Party doesn't have the same excuse. I will get to some of what the Labor Party actually believes, but first I will pose a question to senators, to the chamber and to those listening: what kind of a party and what kind of individuals who know that a policy is good for the nation, know that it grows jobs and know that it grows wages would still choose to vote against it? What kind of a political party and what kinds of individuals would deliberately block policies that they know will create greater opportunities for Australians, will see more Australians in jobs and will see more Australians having the opportunity to be paid higher wages for their jobs? That's a party that's not fit for office. That's a party that is engaging in the most cynical of politicking when it knows that in fact this policy would be good for the nation.

Senator Wong also talked about the 'Labor way'. But what is the 'Labor way' that she talked about? This is why this debate is so critical, because the Labor Party, supported by the Greens, are suggesting that we go down a radically different path in this country. It is a path where you don't actually have any policies for growing the economy; all you have are policies for redistributing wealth. You're left with no policies for growing jobs, you're left with no policies for growing the economy and you're left with no policy for wages growth.

So let's have a look at the Labor way versus the coalition way and compare and contrast. In the last year of the coalition government we've seen 420,000 jobs created, five times as many as in the last year of the Labor government. That was the Labor way. But, worse than that, where over 300,000—or 75 per cent—of those 420,000 jobs that have been created under the coalition are full-time jobs, in the last year of a Labor government, with their anti-business policies, their anti-business rhetoric and their economic vandalism, we saw growth in full-time jobs go backwards. Fewer Australians were in full-time work in the last year of the Labor government than they were a year before. That's one way of doing things. That was the Labor Party policy, and they are now doubling down on that. If they come into government, things will in fact be worse because the policy that they are putting forward has actually moved further to the left.

Going back to Senator Wong's contribution for a moment, it was internally contradictory. It was undergraduate in its contradictions. It started with the proposition that, 'Yes, we knew it was good, but we couldn't afford it.' That's what Julia Gillard said and that's what Bill Shorten has said—that in fact they know that company tax cuts are actually good for wages and good for jobs. But Senator Wong said, 'Oh, we couldn't afford it.' Then she ended, along with her Greens colleagues, by suggesting, 'There is no evidence whatsoever that cutting company tax for small, medium and large businesses in this country will actually grow jobs.' This is what the Leader of the Opposition in the Senate put to this place today—that in fact there is now no evidence that cutting company taxes will grow jobs or grow the economy.

Which economists are the Labor Party now listening to that they would draw such a conclusion? Is this what Chris Bowen thinks? Does Chris Bowen agree with Senator Wong that there is no evidence that cutting company tax actually increases jobs and wages? That's not what Chris Bowen has had to say on this issue in the past. That's not what Julia Gillard had to say on this issue in the past. That's not what virtually any senior Labor figure has said on it in the past. So let's go to what they've said. Chris Bowen says Labor is aiming for a 25 per cent corporate tax rate. He said:

I would like to see the corporate tax rate come down over time. I have previously said that the nation should be aiming for a 25 per cent corporate tax rate.

Why would Mr Bowen, the shadow Treasurer, be arguing for a 25 per cent corporate tax rate? Is that because he likes giving so-called handouts to big business? Or is it because he has actually listened to virtually every reputable economist, who are saying that, if you cut company tax, there will be more investment, more jobs and higher wages? Who's right? Is it Senator Wong, who says now that there's no evidence that if you cut company tax you will get any more investment or any more jobs? Or is it Chris Bowen, who made a completely different point?

Former Prime Minister Julia Gillard said she remained:

… determined to give business a tax cut even though the government scrapped a promise to do so in the budget.

She said:

I am very determined to deliver a company tax cut.

Again, you have to ask yourself the question: why was Prime Minister Gillard determined to give a company tax cut? Was it because she believed in so called handouts to big business, as is now the claim from the Labor Party? Or was it because she actually thought it might be good for the economy and for workers? Former Prime Minister Gillard said many times that it's good for workers, that it's good for economic growth, that it's good for growing jobs and that it's good for wages. Now Senator Wong is claiming there is no evidence that it would be anything of the sort.

Bill Shorten said:

Cutting the company income tax rate increases domestic productivity and domestic investment. More capital means higher productivity and economic growth and leads to more jobs and higher wages.

Was Bill Shorten lying then or was Senator Wong lying today? That's the question. I would say the overwhelming evidence suggests the latter. There is no third-party endorsement other than from the CFMEU and the ACTU for the position that is now being put by the Labor Party in this place. They are now claiming: 'On the one hand, we'd do it if it were affordable, but on the other hand we're not doing it because it'll make absolutely no difference.' You know that is a load of absolute rubbish. It's an insult to the intelligence of the Australian people and, frankly, the people who will be making the decision in this chamber when you've claimed for years that this would be a good thing for economic growth, a good thing for jobs and a good thing for wages, and now you come into this place and pretend that it would actually do nothing. It's an absolute fig leaf for the Labor Party to come in and say, 'Oh, well, it's sort of about affordability, but it actually wouldn't make any difference and it's a handout.' No-one's going to employ any more people, according to Senator Wong, if you cut their taxes. This will be a revelation to people who have been in business in Australia or to anyone who knows anything about business. The Leader of the Opposition in this place today claims that cutting taxes doesn't lead to more investment or more jobs. Which economic theory is Senator Wong relying on when she makes that absurd claim? It is a dishonest claim and it is a claim without any substance. It is a claim that Senator Wong, Bill Shorten, Chris Bowen and the entire Labor team know to be false.

I go back to the question: what kind of party and what kind of people would deliberately vote against a measure that they know would actually grow jobs, grow the economy and grow wages? That is a party and individuals who are not fit to hold office, and they are certainly not fit to occupy the Treasury benches with the economic vandalism that they employed last time, they sought to employ in opposition and they again seek to impose on the Australian people. We know what that Labor vision looks like. We've seen the evidence. It's going to lead to fewer Australians being employed, more long-term unemployment, more young people not being able to get jobs, more underemployment, a lower participation rate and more people on welfare.

Have the Labor Party stopped to consider for one moment that we have the lowest number of people on welfare in this country in 20 years? We have the highest wages growth on record. Have the Labor Party stopped to consider just for one moment that you need good policies to actually help to create that? This doesn't happen by accident. It certainly didn't happen under Labor in their last year when we saw the number of full-time jobs going backwards. You need economic reform in order to deliver higher living standards. You need economic reform in order to deliver more jobs. You need economic reform in order to deliver higher wages. This used to be something that was not accepted only at the fringes of this parliament by the likes of the Greens. We know where the Greens stand. We expect that they don't care about jobs. We expect that they want more people on welfare. We expect that they know nothing about how to grow the economy. But we've got a Labor Party who want to be in government, we've got a Labor Party who are the alternative government in our nation, and they are now putting forward the proposition, the lie, that cutting taxes does nothing for investment. They know it's not true and yet they perpetrate this lie on the Australian people and they put to our crossbench colleagues that it's going to make no difference. At the start of Senator Wong's address, she said that we can't afford it, and, at the end, that it was going to make absolutely no difference. Now, Senator Wong and the Labor Party know that to not be true, even if the Greens don't understand it. But I would say to the crossbenchers, who will be making judgements on this: have a look at the fact that even those in the Labor Party who are arguing against it know it's the right policy. They've argued for it as the right policy. Bill Shorten said:

… lowering the corporate rate for smaller businesses only (as the Greens propose) creates an artificial incentive for Australian businesses to downsize.

In worse case scenarios some businesses might actually lay people off to get smaller—and the size based different tax treatment would create a glass ceiling on business workforce growth.

Instead we want a level playing field regardless of the size of the company.

I repeat what he said:

Cutting the company income tax rate increases domestic productivity and domestic investment. More capital means higher productivity and economic growth and leads to more jobs and higher wages.

We as a Senate are going to have the opportunity soon enough to vote on this legislation, and there's going to be a choice as to whether we believe proposition A, put forward by the coalition and every credible economist, that cutting company taxes leads to more investment, more jobs and higher wages, or proposition B, put forward by the Labor Party and the Greens, that it doesn't make any difference. As they consider that, I would put to senators: if Bill Shorten doesn't believe what he's saying and if Senator Wong doesn't believe what she's saying, you shouldn't believe what they're saying. There has been no credible case put against it, and that's why we've got this overblown rhetoric about handouts. A tax cut is not a handout. A tax cut is only a handout if you believe that all of the money earned by business and individuals is the government's money. That has to be your starting proposition. We reject that. I would expect that most people in this chamber would in fact reject that proposition.

I say this—through you, Mr Acting Deputy President—to the crossbenchers: if the Labor Party do not believe what they're saying, you shouldn't believe it. If no credible economist is backing what they're saying, then what is the case against? If you want to grow the economy, I can point to numerous places where credible economists talk about the growth dividend that will come through. I think it was Warwick McKibbin who talked about $160 billion over the decade. When you do cut taxes, you see an economic growth dividend that's much bigger than the amount you may have gained in tax cuts. There's a funny thing that happens with economic growth—and it is difficult to model, but we've seen it in the past. When you grow the economy by cutting taxes, regulation and red tape, and more people are working, do you know what happens? You actually get more money coming in in taxes because there are more taxpayers, there is more productivity, we're exporting more and we're trading more.

We as a Senate could take the approach put forward by the Labor Party, which is: you don't need to bother about growing the economy; what you need to do is have a look at the economy as it stands and see which bits of it you can redistribute. Well, that policy has been tried many, many times and—I will give you the tip—it has failed every time. The redistributionist policies that are being promoted by the Labor Party do not create a single job. They do not create a single opportunity. They do not see people's wages go up. What they do lead to is, in fact, the exact opposite—as Senator Wong so eloquently put it, 'the Labor way'. What is the Labor way? We saw it the last time they were in office. In the last year Labor were in office, there were fewer full-time jobs in Australia than the year before. We saw the number of people in full-time work go backwards, despite the fact that our population was growing. We've got the coalition way, which is 420,000 jobs in a year—well over 300,000 of those jobs are full-time.

I put it to the Senate that this is not an accident. It has come about through cutting taxes for small business, through cutting regulation, through getting rid of things like the carbon tax, through free trade agreements and through having a mindset that says: 'We want to see businesses have a go. We want to see them have opportunities to employ more people. But we know they can't do it if we put too many burdens on them. By reducing those burdens, we will see prosperity for Australians.' We are seeing that right now. We have an opportunity to build on that or we can take this country backwards, as Senator Wong and Bill Shorten would like us to do, to a place where it's all about redistribution and not about growing the economy. I commend this bill to the Senate. (Time expired)

1:25 pm

Photo of Anne RustonAnne Ruston (SA, Liberal Party, Assistant Minister for Agriculture and Water Resources) Share this | | Hansard source

I, too, have great pleasure in standing today to talk on the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017. We've often heard it said by just about everybody in this place that the most important thing that a government can do is to make sure that the people of this country have a job. We need to have the policy settings to ensure that anybody who is capable of having a job and who wants a job has access to a job. That's why I particularly support this package. It's because I believe this is a job creation bill.

This government absolutely believes that its economic mission in being here is to secure more jobs and higher wages so that families around Australia today and into the future can have the best possible opportunities to get ahead and to prosper. Jobs and higher wages, I'm afraid to say, don't grow on trees. We have to have policy settings. They need to be created. They need to be paid for. The only way that we can pay for more jobs, better jobs and higher paying jobs is to make sure that we have a profitable business community. The fact is that jobs are created by businesses. Nine out of 10 Australians are employed by businesses. So it is on the back of that that this government seeks to create those jobs by putting packages and policies into the marketplace to make sure that businesses are prosperous. This is not in any way a dirty concept. This is absolutely pure economics that says that prosperous businesses allow prosperous employees, create jobs and create better wages. So what we're seeking to do through this particular policy measure is to secure future job prosperity, increase career prospects and make sure that wage increases are there into the future by making sure that we have profitable businesses able to employ people. That's why we are absolutely 100 per cent committed to pursuing a 25 per cent tax level for Australian businesses.

I would like to make a few points about why we think this is so terribly, terribly important. Firstly, we live in a global economy. Our businesses operate in a global economy, and it is becoming much, much more mobile. Capital is mobile, resources are mobile, people are mobile and, in fact, companies are mobile. If we want businesses to remain in Australia and to attract businesses into Australia, we have to be globally competitive. One of the absolutely major factors in our global competitiveness is our business tax rate. It is absolutely our No. 1 economic priority. That is why we believe this particular package is so terribly important to the delivery of prosperity for the future of Australia—taxation absolutely underpins the ability for our businesses to be able to continue to grow and to employ more Australians.

This particular risk that we are talking about at the moment with our tax rate for companies over $50 million is the fact that the rest of the world is moving to a lower tax regime. We see that the US has legislated that now their company tax rate is going to be 21 per cent. France has decided to reduce their business tax from 33 per cent to 25 per cent by the year 2022. So what we need to do is to make sure that we are competitive in the international marketplace with our tax rates so that we are not putting our businesses at a disadvantage. In contrast, if we do reduce our company tax rate to 25 per cent, it corresponds that we will be able to attract more business. And obviously more business means more investment, greater productivity and stronger growth. It is all about growing the economy for more jobs.

But it actually goes further than that. It goes further than just dealing with businesses and jobs. As an Australian economy, as an Australian society, we have a belief that there is a certain level of social welfare requirements, public amenities and social services that we all would like to see for our community. The only way that we can continue to afford and fund those particular services is by making sure that we have a strong economy and strong tax revenues coming in so that we can continue to be able to pay for the things that most Australians believe they have a right to have.

We say that not only does passing these tax cuts back to 25 per cent allow the opportunity for the growth to continue so we can afford to pay for these things; what we fail to mention in this debate is that, if we don't—if we become globally uncompetitive, if we lose business, if we lose investment and, correspondingly, lose jobs and growth revenue—then we are in a situation where we will continue to struggle to be able to pay for all of those things that Australia prides itself on: being a great country, a First World country, a country that not only looks after the disadvantaged but also provides great public amenities and services to the population, like education and health. We believe the basic, fundamental economics 101 of this particular package is about economic growth and providing all of the things into the future to allow Australia to remain at the top of the economic tree.

What has been quite interesting in this debate so far are some of the things that have been said by those from the Labor Party who sit opposite. We're probably not unsurprised at some of the comments that have come from the Greens. We've always known that they've had a long-held view that we don't have to pay for the things that we spend money on in our economy, but those opposite in the Labor Party have shown a level of economic rationalism that is prudent and sensible over time. I think deep down that many people in the Labor Party actually believe that this is the right thing to do. But you don't have to take my word for it. I can actually quote you some things that those on the other side have said over time. I quote the Labor shadow Treasurer, Chris Bowen, who reported in 22 September 2015 that:

Labor accepts that company tax falls hardest on workers rather than wealthy shareholders, and aims for a 25 per cent company tax rate to spur economic growth.

I'm not quite sure what epiphany Mr Bowen's had in the last two years that has had him go from holding that particular belief to now believe that it's a completely wrong premise. I'll be very keen to hear what he has to say about what has happened in the last two years to change his mind to the completely opposite view to his previous view on how corporate tax stimulates economic growth and the impact on wages and the economy.

I also quote the Leader of the Opposition, Mr Bill Shorten, when he was referring to company tax cuts. I will quote the House of Representatives Hansard, so he certainly can't deny he's ever said this:

Cutting the company income tax rate increases domestic productivity and domestic investment. More capital means higher productivity and economic growth and leads to more jobs and higher wages.

He is also quoted as saying:

… lowering the corporate rate for smaller businesses only (as the Greens propose) creates an artificial incentive for Australian businesses to downsize.

In worse case scenarios some businesses might actually lay people off to get smaller—and the size based different tax treatment would create a glass ceiling on business workforce growth.

Instead we want a level playing field regardless of the size of the company.

I'm not quite sure how on earth you can make those statements on the public record. He obviously believed them—well, he either believes those or he believes what he's saying now. That he would, for politically expedient reasons, change a very solid, well thought out, well-constructed belief that he obviously believed in only a couple of years ago is, I think, one of the most disingenuous things anybody could do, let alone somebody who proposes that they should be elected the leader of this great country of ours at some stage in the future. He has turned around today and said something else just because he wants to put a thorn in the side of a government that is trying to have an economic growth proposal policy package for this country. He is seeking to try to bring it undone out of bloody-minded politics instead of supporting what he knows is in the best interests of Australians and, most particularly, Australian workers, when he knows that this is the best thing for Australia.

Previous Labor Prime Minister Julia Gillard equally made a statement in support of a reduction in the company tax rate, because she saw the value of this for economic growth, which leads to jobs. As I keep on saying, this is not just about economic growth for the companies; it is also about jobs. Companies that are profitable and growing not only pay more tax but also employ more people and put upward pressure on wages. Ms Gillard understood that, too, because she said:

If you are against cutting company tax, you are against economic growth. If you are against economic growth, then you are against jobs.

I'm not quite sure how one could be any more categorical in supporting the concept that cutting company tax has a direct and positive impact on jobs.

Always perennial favourites for us are the often logical and sensible comments of Andrew Leigh, who is a member of the House of Representatives. When it comes to economic policy, he quite often comes out with much more common sense than many of those who sit on the same benches as he does. Equally, Andrew Leigh said: 'Company taxes end up being paid by consumers and workers.' We have heard so much from those opposite about how this is somehow going to benefit only the big end of town and that somehow these tax cuts will go straight into the pockets of the chief executives of all the companies. Obviously, those on the other side do not believe for one minute that that's the case. They understand the economic principles that underlie the levers that get pulled in the economy to deliver the outcomes that we seek for this country. Once again, the voice of reason, Mr Leigh, says that consumers and workers pay the ultimate burden of higher taxes, particularly in the corporate area in company taxes. So it would only serve to be logical to suggest that, if we cut company tax rates, it would be the consumers and the workers who would end up being the beneficiaries.

I cannot believe the audacity of those who come in here and make statements that are completely contradicting things that they've said in the past. But, before I finish on some of these amazing quotes, I must draw the attention of the chamber to comments made by the Leader of the Opposition in the Senate, Penny Wong. I will quote the Senate Hansardso it is undisputed:

We understand that the cut in the corporate tax rate is important to increase productivity, to promote broad based economic growth and to encourage more investment and jobs across Australia.

She is also quoted as saying:

… lowering of the company tax rate is good economic policy.

It just beggars belief that we should be sitting here having this debate. We would like to think that somewhere in the next five minutes those opposite will actually realise that they are holding the country to ransom by their behaviour in attempting to stop these tax cuts coming in. Not one, not two, but so many of those in the Labor Party who like to think that they've got economic credentials have constantly been in the public domain and in the various chambers in this very parliament talking up the economic value, the jobs growth value and the national value and benefit of tax cuts; yet we are standing here today as a government—a good, solid, sound economic policy delivering government, a jobs growth policy delivering government—having this conversation.

One of the things I probably took the greatest exception to was this idea that somehow the only beneficiaries of these tax cuts were going to be businesses. I think the Leader of the Opposition in the Senate in her contribution described them as 'undeserving recipients' of these particular tax savings. I'd like the Leader of the Opposition in the Senate to advise us whether she actually believes the following companies in South Australia are 'undeserving' of the benefits that are likely to be delivered from these proposed tax cuts. I would draw the chamber's attention to a number of good, solid South Australian companies that I am sure many in this chamber will have heard of.

Angove Wines, a large wine business in my home town of Renmark in the Riverland, has a turnover of more than $50 million. Its main retail operations are in the Riverland and McLaren Vale. It has 170 staff who are permanently employed and an additional 190 during vintage. Samuel Smith & Son, which is known to many as the Yalumba brand, has an annual turnover well in excess of $50 million. Australian Vintage and Accolade Wines are other wine companies in South Australia. In South Australia alone, just off the top of my head, I can tell you about four wine companies that are employing thousands of South Australians. Accolade Wines alone employs over 1,000 people and, once again, it is administered from South Australia. Are they undeserving recipients?

Who hasn't heard of South Australia's great family-owned brewing company Coopers? Their turnover is well in excess of $30 million, with a staff of 230, and is administered from South Australia. Who hasn't heard of Haigh's chocolate frogs? Anybody who wants to say they haven't, let me know and I'll make sure I deliver you a chocolate frog. Haigh's turns over more $50 million. And there is San Remo pasta—I'm sure you've heard of it. The list goes on and on. RM Williams, with a $127 million turnover, is based in Salisbury in South Australia with 650 people employed locally and nationally. Many of you probably go to bed at night but don't realise that the blanket you pull up or the lamb's wool you're a lying on is actually a product of Michell Wool, another great South Australian company. Codan is a fantastic Australian company and a world leader in technology. Then there is the Mossop Group and the Sarah Group, both of which build homes, and the Ahrens group, which manufactures agricultural machinery. I could go on and on. There's the Adelaide Airport. They are examples of great South Australian companies, which many in this chamber would have heard of. Are they undeserving recipients of the benefits? Are they undeserving recipients who might choose to employ more people if they were given the incentive to do so by the economic environment created through these company tax cuts that are on the table at the moment?

Let's dispel a couple of myths about this particular suite. It is actually good for jobs. A strong economy creates jobs. If anybody would like to disagree with that, I'm happy to have the debate. This policy is also fully costed over the forwards, but it will result in higher government revenues. We've already seen with the tax cuts that have been delivered for companies under $50 million an immediate increase in the tax revenues coming from those particular businesses. Whilst it looks as though there is a cost attached to this policy if you take it right now, the long-term, and even the medium- and short-term, returns to government on increased receipts are absolutely unquestionable.

We also need to be very clear about the consequences of not changing this company tax rate. Companies currently are striving to grow in the Australian marketplace, but if we say, 'If you are over $50 million,' where is the incentive to grow? They hit the ceiling at $50 million and they don't want to go any further. That is stifling the growth of some of our great medium to large companies. There is always the possibility that large companies will go offshore. If you have a tax incentive of between 21 and 30 per cent between us and the US, there is a massive incentive to move offshore. Basically, this makes Australia plainly uncompetitive.

They say it's only for the big end of town, but you only have to look at the comments of people like Ken Henry, who said, 'In the long run, company tax affecting mobile capital is paid by labour, predominantly geographically immobilised, unskilled labour.' They suggest it is for the big end of town, but we know that's not true. There are so many credible economists who have said that isn't the case, and so it is disingenuous to suggest it in here.

In conclusion, we believe all businesses in Australia, whether they are big or small, are in the one ecosystem. They work together, live together and cross-pollinate together. If big business does well, small and medium businesses, who supply goods and services to many of the large companies, will be successful, so there will be a negative impact on them if we take the heads off the big businesses around town. They are the drivers of our economy, and all big businesses were small businesses once. We must protect Australia's position as a competitive place to do business, and we must make sure that we get rid of this populist narrative that suggests, for some reason, that we are only sticking money in the pockets of the big end of town. We are not. We are creating jobs, we are making our businesses competitive and we are increasing revenues that will support our country into the future. I commend this bill to the house.

1:45 pm

Photo of Lucy GichuhiLucy Gichuhi (SA, Liberal Party) Share this | | Hansard source

Someone once said that the beauty of the word 'and' triumphs over the tyranny of the word 'or'. We always have a choice. Do we forever fight over a bigger slice of the pie or do we work together to grow a bigger pie for companies and Australians as a whole? This is how I see the current debate in basic terms. It is a privilege to be part of a government that is determined to help all Australians and Australian businesses realise their full potential, to be free to partake in the dignity that economic participation and growth provide. The coalition government wants to empower the Australian people to showcase their skills and talents, to improve themselves by playing their part in building a better and more prosperous country. Whether you are an employer or an employee, a vibrant economy allows you to realise your full potential by creating the options you need to express your individuality and creativity.

As Australians, we have proven ourselves to be blessed by such world-class innovation. Average people and average families are willing to take the risks associated with small and medium businesses—and large businesses as well—putting their entrepreneurial spirit on display as they serve their fellow man and support their families and businesses. As their businesses grow, they provide the work that we all crave to sustain our sense of self-worth and our sense of belonging. There would be no employment without an employer, without a business. One of this government's policies is our competitive tax reforms that will ensure this entrepreneurial spirit is sustained and promoted.

We must rise above any talk that jeopardises the interdependence between employee and employer, or puts Australians against one another. The use of rhetorical devices that simplistically pit rich against poor, or stoke the fires of envy, only hurts our shared identity and our Australian spirit. Historically, our company tax rate has been broadly aligned with OECD averages. Whilst other countries have considerably lowered their rates, we have been stagnating at 30 per cent. We are now five percentage points above the OECD average of 25 per cent. Our international competitiveness is suffering under the trend of new corporate tax rates all over the world. For example, America has locked in a rate of 21 per cent, to be implemented immediately; the French parliament has recently moved to gradually reduce the rate from 33 per cent to 28 per cent; and Britain has reduced its tax rate to 19 per cent.

Our government, as a start, needs to adjust our own rate to reflect these international trends. We have gone from having the ninth lowest corporate tax rate among the advanced countries in 2011 to our current position of fifth highest. Prior to the last election, our tax rate was still lower than the United States of America's. Now that they have issued a significant cut, our current rate of 30 per cent will be a stark contrast in the global marketplace.

Our plan to lower the rate to 25 per cent by 2026-27, for all Australian companies, is part of a larger package of reforms to boost business investment and the level of GDP by over one per cent in the long term. This builds on the tax cut provided to small and medium business in the 2015-16 budget and the first stage of the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016. It provided a business tax cut for companies with an overall turnover of less than $50 million. This includes small- and medium-sized businesses. This lower corporate tax rate will improve the competitiveness of our businesses and ensure a greater level of business investment. It will boost the productivity of all Australians and Australian businesses and drive an increase in real wages and real standards of living.

Modelling done by Treasury two years ago revealed that, if the 25 per cent tax rate had already been in place today, full-time workers on average weekly earnings would have had an extra $750 per year. Since the initial tax cut was passed in early 2017 some 400,000 new jobs have been added to our economy. In addition, wages have grown by 1.2 per cent over the September quarter and three per cent through the year. It is important to remember the remarks of former Treasury Secretary Ken Henry, who knew the true cost of keeping company tax rates high and uncompetitive: 'The unintended consequence of this kind of tempting tax revenue is the pain and suffering it causes to average Australians. In addition to the reduction of overseas investment in Australian companies, high tax rates lower the demand for Australian workers.' This position is shared by Canadian tax expert Professor Jack Mintz, who pointed out that 'companies do not bear the taxes they pay but people do'.

Only when living costs are incorporated into our understanding of wellbeing will we understand the importance of competitive tax rates. Australians will benefit from a higher standard of living and be part of a marketplace with cheaper consumer goods. Now that the Australian mining boom is over, it is crucial that we move to a more diversified economy that can innovate and flourish without burdensome tax rates. We will see considerable job creation in new industries—industries that will have the freedom to thrive in this creative environment. Those who are now employees will be encouraged to put their business ideas to the test, becoming employers who will build our nation and hire the next generation of Australians. Small businesses will become medium businesses, and medium businesses will become large businesses. Existing employees will also be able to look forward to a more competitive bargaining position. Businesses will be required to pay more to keep their workers when there are more jobs available. It will create a more conciliatory and cooperative atmosphere between employee and employer, and all Australians will share in this increased prosperity.

This already has firm international precedents. Now that America has issued their company tax rate, more than 350 companies have given wage increases and bonuses to more than four million Americans. The bottom line of our plan is to allow businesses to hire more Australians and pay them a better wage. This applies to nine out of 10 working Australians who work for the private sector. There are 4,500 Australian businesses that have a turnover of greater than $50 million per year and employ about four million people. The coalition tax plan will gradually introduce tax cut cuts over the next seven years, providing the certainty that businesses need as they make short-, medium- and long-term investment decisions. This is why we have to review policies that keep us economically stifled.

Growth for individuals and businesses is one of the core values of the Liberal Party. We want our economy to be a fertile ground for individuals and businesses to thrive in the global marketplace. Until recently, this was the position of the current Leader of the Opposition, Bill Shorten. Speaking in the other place in 2011, he said:

Cutting the company income tax rate increases domestic productivity and domestic investment. More capital means higher productivity and economic growth and leads to more jobs and higher wages.

I agree. In addition, the Labor Party's 2010 budget stated:

Cutting the company tax rate will make Australia a more competitive destination for investment. Greater investment in capital will support higher productivity and real wage increases for Australian workers.

I agree. The current shadow Treasurer, when asked in 2015 whether or not he agreed with a statement that company tax falls hardest on workers, said:

It's a statement of fact, which I agree with—

and I agree. These are lucid comments made in more sober-minded times. We cannot allow the politics of the day to intrude upon sound economic policies and practices. Let us all support policies that accord with what is best for all Australians. We cannot afford to submit to a spirit of fear, division or economic propaganda.

Contrary to popular opinion, the vast majority of businesses in Australia pay their fair share of tax and do not engage in sophisticated tax avoidance strategies. The Australian tax office has received over $663 billion in company tax over the last decade. Roughly, 20 per cent of all Commonwealth taxation revenue in 2017-18—

Photo of Scott RyanScott Ryan (President) Share this | | Hansard source

Order, Senator Gichuhi, it being 2 pm we'll move to questions without notice. You'll be in continuation upon the resumption of the debate.